Metro Ethernet to earn $7.7bn in Asia by 2010

Metro Ethernet services in Asia are being driven by strong enterprise demand

Metro Ethernet service providers in the Asia Pacific region will be making almost $8bn annually within four years, market watchers predict.

The growing market for Metro Ethernet services in the region is being driven mainly by demand from enterprise customers, researchers at In-Stat believe. 

Future growth will be boosted by consumer demand for new high-bandwidth services such as IPTV, according to sources at network hardware maker Nortel Networks.

As the number of enterprises in the region connected to Metro Ethernet networks rises from last year's total of 630,000 to an estimated 2.64 million in 2010, service revenues will more than double from $3.12bn to $7.73bn.

"As service providers realise that the bandwidth flexibility Metro Ethernet offers to enterprise users is greatly welcomed, they will put more effort into developing market opportunities around basic Metro Ethernet connectivity in the next five years," said In-Stat analyst Vincent Liu.

Ethernet was originally designed for short range local area networks. Metro Ethernet extends the range of the technology to cover entire urban areas, as the name suggests.

The resulting system is sometimes classified formally as a metropolitan area network. Metro Ethernet is often carried on an optical fibre backbone, with short range wired or wireless links from local hubs to individual users.

Manufacturers of Ethernet hardware claim that the tried and tested nature of the technology makes it cheaper to implement than competing systems, even when the range is extended in this way.

"[Business customers] value the cost-effectiveness of Metro Ethernet services for inter-office connectivity and high-speed internet access," said Liu.

Currently, the majority of these business customers are small and medium-size enterprises in Japan and South Korea.

While these two countries, along with Hong Kong, are the most mature sectors of the regional market, many industry players have their eyes on China's huge consumer markets.

Nortel has begun promoting its hardware strongly in the region this year.

"In China, where there is strong interest in IPTV, and current service provider infrastructures cannot handle IPTV's multicasting requirements, we envision significant opportunities for the new Metro Ethernet solution," said Larry Tsang, vice president of wireline and optical networks for greater China at Nortel.

However, with a variety of competing technologies likely to be on offer, In-Stat warned that service providers should pay attention to marketing and customer education to ensure that customers understand and subscribe to Metro Ethernet services.

And once customers are signed up, healthy long-term revenues will be more likely if operators can hook subscribers with a wide selection of value-added services, Liu believes.

Worldwide service provider revenues from Ethernet-based services will rise from $2.5bn in 2004 to $22.2bn by 2009, according to Infonetics Research estimates.